THE MAGIC OF ENTREPRENEURS
My late grandfather started a small furniture factory in Johannesburg in 1932. He was an immigrant from eastern Europe, trained as a cabinet maker. His son joined him later, and the business prospered.
At its height, it employed 40 workers but declined to about 20 employees in recent years. It was never an easy business, with hot competition, especially from overseas countries with lower labour costs.
A big problem was the increase in wood costs was, and high charges for municipal and other services. The Furniture Industry Industrial Council was a particular headache with all its rules and regulations.
Even though the factory workers mostly earned double the industry minimum wage, the harassment took its toll. Last month it all became too much and the 80-year-old business was forced into liquidation.
The workers were paid off, some of whom had worked there loyally for years. It was a sad end to a family business that had been through many travails. But it was just one of many small companies that folded recently.
Over the past five years 440 000 small businesses have closed their doors.
According to Adcorp's Loane Sharpe, some years ago about 250 000 people were starting businesses at any given time. This has now declined drastically to only 50 000. And studies show that about half of business start ups fail in their first year of operation.
It's really tough being an entrepreneur, but they are the key to innovation and growth in any economy. Big businesses can look after themselves as they can afford lawyers, accountants and human resource departments.
They deal with the maze of laws and regulations that conveniently deter competition from new businesses. What's ignored is that small firms employ about 65% of all employees in South Africa.
Studies show that the vast majority of new jobs created are in companies less than five years old. The biggest boost for them would come from tax breaks and the elimination of red tape.
A 2004 study found that red tape cost South Africans R79 billion. This was equivalent to 6.5% of GDP and 16..5% of the total wage bill. I recall former Gauteng Premier Mbhazima Shilowa promising a major red tape reduction effort, but nothing came of it.
The Western Cape government leads the way with a Red Tape Unit that gets rid of all unnecessary provisions that hinder businesses. A Red Tape Call Centre receives enquiries and, wherever possible, eliminates obstacles swiftly and decisively.
The provincial government has even employed a full time person at the local Chamber of Commerce to troubleshoot red tape there. And Western Cape has a good record in paying suppliers within 30 days, unlike Gauteng where tardy payment is a business nightmare.
More media attention and praise should be given to entrepreneurs whose drive and creativity leads to whole new industries. Is it at all possible, for instance, for a government department or committee to have invented cell phones? Or to have improved them dramatically with ever more features at lower cost?
Government should do everything it can to encourage entrepreneurs. This includes getting out of their way as they perform their magical innovation that uplifts everyone.
Jack Bloom MPL, is DA Leader in the Gauteng Legislature. This article first appeared in The Citizen.
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